Question

A restriction on imports is likely to lead to

a) more open trade.
b) no profits for firms in the country establishing the restriction.
c) greater employment for the country establishing the restriction.
d) further restrictions on trade and a retaliatory response.

Answer 1

Import restrictions often lead to short-term employment gains in the restricting country, but they come at the cost of higher consumer prices and can provoke trade retaliations. Therefore, the correct option is D.

Step-by-step explanation:

Restrictions on imports typically lead to protectionism, which is when a country limits imports through the use of tariffs, import quotas, and nontariff barriers. This can increase domestic employment in the short run as domestic production is substituted for imports, so the most likely outcome from the options provided would be greater employment for the country establishing the restriction. However, this protectionism also leads to higher prices for consumers and can provoke retaliatory responses from other countries, which could result in a trade war and further restrictions on trade.